How is Total Costs (TC) calculated?

Total Costs (TC) is calculated by adding Fixed Costs and Variable Costs together. Fixed Costs are the expenses that do not change with the level of goods or services produced, such as rent or salaries. Variable Costs, on the other hand, fluctuate directly with production volume, such as raw materials and labor costs tied to production levels.

By combining these two types of costs, you arrive at the Total Costs, which gives a comprehensive view of what it costs a business to operate at a certain level of production. This understanding is essential for pricing, profitability analysis, and overall financial planning in an enterprise.

The other options do not reflect how Total Costs are determined; subtracting, multiplying, or dividing Fixed Costs and Variable Costs does not yield a meaningful financial metric related to the total expenditures of a business.